How Quad became more than just a printer

Somewhere along the way, Sussex-based Quad/Graphics Inc. began doing more than just printing magazines.

It happened before the company started inserting virtual reality viewers in the Sports Illustrated swimsuit issue and developing plans to help clients get branded VR viewers inserted into magazines. It was also before Quad built a $200 million packaging company and added offerings for in-store displays.

When Quad took over the creative work for Cabela’s and placed its employees on-site at Dick’s Sporting Goods and L.L. Bean, it had already happened.

Convincing 50 online retailers to print physical catalogs was about more than just adding volume. Suddenly, Quad was investing in digital marketing and video placement companies and analyzing data on marketing campaigns.

Somewhere along the way, Quad/Graphics became more than just a printer, but for Joel Quadracci, the transformation is a continuation of what the company has previously done.

“It’s not like we just one day woke up and said ‘We’re going to transform the company,’” he said. “All this stuff has been evolving, but what’s real interesting is this convergence of online/offline has sped up dramatically in the last two years and it’s propelled our offering because of that.”

Quad began taking advantage of its size, leveraging the access that comes with being a major supplier of print services to promote its marketing services. Those services also lead to more work for the print portion of the business.

“Instead of them calling us up and saying ‘We have this campaign we’re doing. You’re the print part; go print a million of these things,’ we’re actually involved in designing the campaign,” said Quadracci, chairman, president and chief executive officer of Quad/Graphics.

It’s not surprising a company opting to make its own ink, develop its own printing technology and provide its own health care services to employees is now pursuing new lines of business in marketing.

The surprise is the speed and scale of change in the past six-plus years. Quad/Graphics was formed in 1971 and grew to $1.8 billion in revenue in 2010. Since then, the company has executed more than a dozen acquisitions, more than doubled annual revenue to $4.7 billion, added thousands of employees, and invested in expanded digital marketing capabilities.

All of those acquisitions came with the challenge of integrating employees into Quad’s distinctive culture, complete with the dark blue uniforms worn by everyone, including the CEO. Quad has also closed 34 printing plants during that time and reduced its overall headcount by 10,000. If those facilities were a company, it would have $2.5 billion in annual revenue. Quadracci said he knew there would be closures as the company played the role of industry consolidator.

The economic downturn created by the Great Recession disrupted the printing industry, which relies on economic growth to fuel volumes and pricing. At the same time, the rise of digital and mobile technology disrupted printers and their clients. The printing industry went from using almost 79 percent of its capacity in 2007 to a low of less than 59 percent just two years later, according to Federal Reserve data. The industry has rebounded some, averaging almost 65 percent utilization through the first six months of 2016.

Even five years into its consolidation efforts, Quad still had work to do when it came to optimizing its manufacturing footprint and integrating its culture throughout the operation. When the 2015 third quarter financial results showed a greater-than-expected pullback in industry volumes and pricing pressures, combined with lower productivity, Quadracci opted to implement a $100 million cost reduction program and a $775 million non-cash goodwill impairment charge.

The plan, announced in November, called for reducing capacity with plant closures, an increased focus on productivity, a new organizational structure and reductions in selling, general and administrative costs. Quad was able to complete the plan by January and the first quarter of 2016 was the first to show a profit since the end of 2014. Through the first six months of the year, revenue was down 3.4 percent, but operational expenses had been reduced by 6.3 percent.

More than ink on paper

Quad has laid out a strategy to make it through a challenging period in the industry while also achieving its goal of being the “high-quality, low-cost producer.”

The plan centers on building the core of its business, looking for opportunities to grow, and engaging with customers and employees, all while maintaining a strong balance sheet.

Putting ink on paper is still at the heart of Quad’s work, but a big part of the company’s plans involve the work being done at BlueSoho, an integrated marketing agency within Quad that focuses on helping clients identify the marketing channels in which to invest.

BlueSoho initially was formed in 2004 and based in New York City as a digital art and image retouching studio. The business was repositioned in early 2015, with the addition of a mobile marketing agency and media planning and placement group, both of which Quad acquired in recent years.

BlueSoho accounts for about 3 percent of Quad’s revenue, but Quadracci said it increasingly touches every aspect of the business and $1 of spending with BlueSoho can translate to $8 or $9 of spending in other parts of Quad’s business.

“In the last two years, I’ve never seen the C-suite, the CMOs, the CEOs, react as well as they’re reacting right now to a printer telling this story, because we can prove the results,” Quadracci said.

Quad’s commitment to the work of BlueSoho was evident in two moves the company made earlier this year. BlueSoho president Eric Ashworth was promoted to executive vice president of product solutions and market strategy for the whole company in April. In July, Quad announced it had made a $12 million minority investment in Rise Interactive, a Chicago-based digital marketing agency.

For Quadracci, investing in a digital agency or growing BlueSoho is as much about creating opportunities for Quad’s print capabilities as it is about developing digital offerings.

“No media channel has really replaced another,” he said. “The more these things are layered on top, we’ve proven over the years, the more media channels you use and the tighter they’re connected the higher the overall responsiveness of that dollar you’re spending.”

Quad worked with Colorado-based grocer Lucky’s Market to create a multichannel campaign that focused on increasing store traffic, loyalty card membership and sales of certain product categories.

The grocer came to Quad for help with its Sunday inserts, but Ashworth said after finding savings there, Quad was able to work with the company on the larger program.

The basic idea was to coordinate the Sunday inserts with online and social messages. It used beacons to monitor cellphone traffic in and out of stores and targeted better deals to potential customers living closer to competitors. The stores got a spike in traffic and the campaign’s targets were met, Ashworth said.

“The important thing is how do you continue to come up with campaigns that are leveraging these spends, online, Sunday insert and my in-store activity, so they’re partnering for great results,” he said, adding that doesn’t mean using all channels at once, but instead focusing on using the right methods in the right proportions. “Clients don’t need omnichannel campaigns; they need effective multichannel campaigns.”

The scale of Quad’s printing operations helps convince clients they should also turn to the company for help with the design of their marketing campaigns.

“Because we’re printing the physical assets, we’re a big line item in their expense. There’s a lot of zeros attached to our invoices,” Quadracci said, adding Quad’s size gives it access to executives other printers may not have.

Evolving capabilities

Quadracci said the company’s expanded capabilities, developed organically and through acquisitions, have been the result of evolving technologies.

When Quad recommended clients link to product demonstrations from QR codes on their direct mail pieces, the clients asked the company to produce the videos. Quad didn’t have the capability, but built and bought what it needed to send with the photography teams already shooting pictures of client products.

In 2013, Quad also invested in Pixability, a Boston-based company that, among other things, helps companies place their videos ahead of competitors on YouTube.

“So suddenly, here’s a printing company telling you how to put video on YouTube,” Quadracci said.

As much as the digital capabilities are a new development, they also draw on expertise developed over the past three decades. Tom Frankowski, chief operating officer at Quad/Graphics, said printers had to become experts in handling large data files as electronic pre-press operations developed. Quad also has data management knowledge from its co-mailing operation that ships magazines in bundles organized to match a mail carrier’s route.

Those two capabilities became the roots of the marketing expertise Quad now offers, Frankowski said.

“Quad’s become experts in how people engage brands and how they engage products,” Ashworth said. “BlueSoho is simply taking that back up to the marketer and saying, ‘We now understand how your segments engage your products better. We’re going to help you apply that to other aspects of how your clients engage your brands.’”

Quadracci said he could see producing a campaign involving a direct mailing with a variable-printed watermark on each piece tied to the recipient’s address. A discount offer would prompt the recipient to take a photo of the mailing to download an app. The app would recognize the watermark and connect the address to the phone.

When the recipient goes shopping, a beacon in the store recognizes the phone and sends a message to the user, thanking him or her for coming in and offering an additional discount. The app also serves as a holding place for the discounts, making it easier to get savings.

“Think about that; that is a truly connected channel,”Quadracci said.

Dealing with privacy concerns

For all the tracking and targeting involved in connecting the marketing message across so many channels, Quadracci said privacy concerns don’t come up much.

“Just go on Facebook. Go look at what people are sharing,” he said.

The important part is the consumer’s decision to opt-in. If someone doesn’t want to download an app or participate in a loyalty program, that person isn’t going to do it.

“People are pretty smart. They know that that’s what’s happening today,” Quadracci said. “I think the consumer just expects it.”

Even as new technologies, like ad blocking, emerge with the potential to make things more challenging, Ashworth said he isn’t concerned. If sharing information allows a company like Amazon or Netflix to make better recommendations to him, he is alright with that.

“People want to engage brands if the brand speaks to them in the right frequency about the right things,” he said. “If you’re going to annoy them, they’re going to block you.”

Quadracci thinks of it as customer service and a return to one-to-one marketing, like a store owner knowing regular customers. Mass marketing drove away the knowledge of individual consumers, but over time, technology allowed for its return. That included the ability for magazines to run different advertisements for different geographies.

In the 1990s, ink jet technology allowed for targeted discounts to be printed on catalogs for valued customers.

“We saw back then that response rates would increase,” Quadracci said.

The channel for a marketing message can extend beyond traditional mediums, Quadracci said. Packaging has always been part of a company’s brand, but he said it can move closer to being part of a one-to-one campaign.

“Packaging is a natural place for us to expand to, because we know how to put ink on substrates,” he said. “It’s an industry I think that can use more innovation and technology in the platform.”

Using technology means using variable printing on 80 million soda bottle labels for PepsiCo Inc. with one of 24 different emojis on each label. It means making a package for pharmaceutical products that sends users to a product video when they hold their phone to a box. It could also mean micro-targeting packaging for beverages so those sent to Milwaukee would feature Summerfest-related promotions and those in Lake Country would feature a local festival.

The important part, though, is to take that thinking throughout the campaign, which means thinking about direct mail at the same time as packaging, online, mobile and other channels.

“We’re not going to be the guys who come up with the funny commercial, but we’re going to be the guys who tell you what channels, in what proportion, the campaign should be in,” Quadracci said.

Growing in Wisconsin

For all the work Quad has done to increase its digital offerings, there has been more done on integrating the employees and systems from all of Quad’s acquisitions. In some cases, like World Color Press Inc. in 2010, the previous acquisitions hadn’t been fully integrated. Quadracci said World Color, the first major acquisition Quad made, had 64 different vacation policies and seven enterprise resource planning and IT systems in place.

“No one could point to an overarching corporate culture that tied them all together, because they never integrated them,” Quadracci said.

Frankowski noted the legacy Quad employees quickly became a minority group as the company made acquisitions. The company has a three-day class that helps to transfer the company culture to the employees of acquired companies. He said starting with culture makes it easier to transition IT systems, strategic plans or just generally do things differently later on.

“We learned early on we shouldn’t hide who we are and we should lead with it,” Frankowski said.

Quadracci said there was a lot of “heavy lifting” to do when it came to integrations.

“A lot of these plants had been neglected for years and we knew that we’d be closing a lot of plants,” he said. “We want to get (the work) into an efficient, low-cost platform.”

The company’s more efficient plants also tend to be its larger ones. With four of its 10 largest locations in the state, Wisconsin has been the beneficiary, with Quad growing from 5,600 employees in the state in 2010 to 7,500 now.

State tax dollars have supported the growth, as the company was awarded up to $46 million in tax credits starting in October 2010 and was eligible for $29.2 million of those at the end of 2014. Another $15.7 million in tax credits were awarded in 2015, but the company isn’t eligible for any of those awards yet.

Quadracci said finding employees for its Wisconsin facilities was part of the problem when Quad ran into productivity issues in 2015.

“I can run these presses more often if I can get more people,” he said.

Quad has training programs in place to get employees the skills needed to run its multi-million-dollar machines. The positions can start at $14 per hour and reach $24 in four to five years, Frankowski said

Quad also has answered labor challenges by automating and upgrading plants. Autonomous forklifts move some materials, robots are used to stack items on skids and digital presses have been added to several plants.

Quadracci doesn’t see print going away, but the company will continue to evolve and apply new technology.

“We’re not going to sit here and be locked in cement on what we think the world’s going to look like,” he said. “You have to move quickly and you have to evolve with what’s possible in the world if you’re going to be successful in any company.”

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Next Generation Manufacturing Summit to be held at Quad

Joel Quadracci to highlight panel

Next Generation Manufacturing will be the theme of the seventh annual Manufacturing Summit, presented by BizTimes Media and the Milwaukee 7.

“The goal of the Manufacturing Summit is to help leaders of our area’s manufacturers run their companies more successfully,” said BizTimes Media publisher Dan Meyer. “According to the 2013 Next Generation Manufacturing Study, most manufacturers, even those that are successful, aren’t investing in the strategies that will carry their firms into tomorrow. To prosper into the next generation, manufacturers must embrace and support Next Generation strategies at a world-class level. The Next Generation Manufacturing Summit will provide information to help them do that.”

The event will be held from 7 a.m. to 10:30 a.m. on Thursday, Oct. 6, at Quad/Graphics Inc., N61 W23044 Harry’s Way, Sussex.

Joseph Weitzer, dean of the Center for Business Performance Solutions at Waukesha County Technical College, will moderate a panel discussion at the event.

The panelists will include: Joel Quadracci, chief executive officer of Quad/Graphics Inc.; Mike Reader, president of Elkhorn-based Precision Plus Inc.; and Al Antoniewicz, president and chief operating officer of Waukesha-based Spancrete.

The event is geared toward C-level and top manufacturing leaders, to provide them with peer-to-peer experiences and best practices. The panel discussion will focus on topics related to how they are navigating  issues related to growth in sales; process improvement; technology and innovation; talent attraction, development and retention; supply chain management; sustainability; global engagement; and more.

“Advanced manufacturers are our future. Milwaukee 7 is dedicated to making this region globally competitive, and the discussions at the Manufacturing Summit will deliver high-value content that our manufacturers can put into practice,” said Pat O’Brien, Milwaukee 7 executive director.

The panel discussion will be followed by three, 25-minute sessions on 20 different roundtable topics where table leaders will dig deeper into similar topics to those discussed on the panel.

The event will conclude with a tour of the Quad/Graphics plant.

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For more information about the Next Generation Manufacturing Summit,or to register, go to: www.biztimes.com/mfg